Reasons For The Limited Core Global FI Reaction To BoJ Exiting NIRP

Some reasoning behind the modest core global FI reaction to the BoJ decision (these were identified/flagged ahead of time):

• Today’s outcomes were largely priced in by markets and signaled ahead of time via various news outlets (including MNI).
• The BoJ is clearly cautious when it comes to the prospect of further tightening.
• YCC wasn’t seen as a major impediment for JGB yields at prevailing levels ahead of the event.
• As a result, JGB yields were lower on the day, although closed off session lows.
• More broadly, there is focus on the start of easing cycles across the remaining major global central banks (albeit with Fed rate cut pricing moderating in recent weeks), limiting BoJ feedthrough.
• Limited expectations re: feedthrough also lessen pricing/worry broader market vol.
• Focus will now fall on Japanese flows surrounding foreign bonds in the coming weeks/months.